Lagarde assures IMF able to boost crisis funds

Washington: IMF head Christine Lagarde said on Thursday that it would be able to boost its crisis intervention capacity this week as worries mounted that Spain might be the next eurozone country to seek a rescue.

Warning that "dark clouds" still hover over the global economy, she expressed confidence that International Monetary Fund members meeting this week in Washington would put up the funds needed for a "global firewall" -- despite the United States not taking part.

"As part of the outcome of this meeting, we expect our firepower to be significantly increased," she said, hours after Poland and Switzerland declared their contributions to the USD 400 billion pool targeted to forestall any financial contagion from Europe.

Worries that Spain might be the next country to seek a bailout, sparking new turmoil across the fragile eurozone, have filled markets over the past week.

Today Madrid scraped through a key bond market test but failed to quash doubts over its future finances.

Overall, the Spanish Treasury raised USD 3.3 billion, above its goal, at a high borrowing rate for 10-year notes but still below the psychologically important 6.0 percent level.

Investors had been nervously waiting for the government bond auction, fearing a flop could unleash new attacks on Spain's sovereign debt and reignite the flames of the eurozone debt crisis.

"Spain has replaced Greece in the international and especially the Anglo-Saxon press as the country that has the most problems. The problems are clearly enormous but reforms are being made," said Daniel Pingarron, analyst at Spanish brokerage IG Markets.

Even so, he admitted, "These tensions are not going to calm in the short term or even the medium term," he added.

Lagarde said Spain does not need an IMF rescue loan as long as Europe itself keeps working to help the government with its reforms.

"There is no such need at the moment as I understand," she told Bloomberg Television.

Madrid was taking "really serious measures" on reforming the country's labour market and reducing its fiscal shortfalls, she said.

"I hope that through the combined efforts that the Europeans will be able to support the efforts undertaken by the Spanish government." (AFP)